-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q4kZNAIJGV7ShG9VBlZBnlD+kJtr528xMZ5fDVadjKr+PvAaFLkX5Be5V78HYTdw 6hUBgUcU9LM9QrhC9i5gsg== 0000950148-96-000812.txt : 19960724 0000950148-96-000812.hdr.sgml : 19960724 ACCESSION NUMBER: 0000950148-96-000812 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALL-COMM MEDIA CORP CENTRAL INDEX KEY: 0000014280 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 880085608 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16730 FILM NUMBER: 96564311 BUSINESS ADDRESS: STREET 1: 400 CORPORATE POINTE STREET 2: SUITE 780 CITY: CULVER CITY STATE: CA ZIP: 90230 BUSINESS PHONE: 310-342-2800 MAIL ADDRESS: STREET 1: 400 CORPORATE POINTE SUITE 780 CITY: CULVER CITY STATE: CA ZIP: 90280 FORMER COMPANY: FORMER CONFORMED NAME: SPORTS TECH INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL HOLDINGS INC DATE OF NAME CHANGE: 19920518 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL GAMING CORP DATE OF NAME CHANGE: 19890518 10-Q 1 QUARTERLY REPORT FOR THE QUARTER ENDED 3/31/96 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ---------------- ------------------- Commission file number 0-16730 ALL-COMM MEDIA CORPORATION (Exact name of registrant as specified in its charter) Nevada 88-0085608 (State or other jurisdiction (I.R.S. Employer Identification No.] of incorporation or organization) 400 Corporate Pointe, Suite 780 Culver City, California 90230 (Address of principal executive offices] (Zip Code) - - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report] Registrant's telephone number, including area code: (310) 342-2800 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share (Title of class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of May 10, 1996, there were 3,186,734 shares of the Registrant's common stock outstanding. 1 2 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS FORM 10-Q REPORT MARCH 31, 1996
PART I - FINANCIAL INFORMATION Page ---- Item 1 Interim Condensed Consolidated Financial Statements (unaudited): Condensed Consolidated Balance Sheets - March 31, 1996 and June 30, 1995 3 Condensed Consolidated Statements of Operations - Three and nine months ended March 31, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows - Nine months ended March 31, 1996 and 1995 5 Notes to Interim Condensed Consolidated Financial Statements 6-9 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-16 Item 4 Submission of Matters to a Vote of Security Holders 17 PART II - OTHER INFORMATION Item 6 Exhibits and Reports of Form 8-K (a) Exhibits 18 (b) Reports on Form 8-K 18 Signatures 19 Exhibit 10.5 Amendment to Option Agreement 20 Exhibit 10.6 Memorandums of Understanding 21-29 Exhibit 11 Statements Regarding Computation of Net 30 Income (Loss) Per Share Exhibit 27 Financial Data Schedule 31-32
2 3 PART I - FINANCIAL INFORMATION ITEM 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
March 31 June 30 ASSETS 1996 1995 ------------ ------------ Current assets: Cash and cash equivalents $ 726,068 $ 1,217,772 Accounts receivable, net of allowance for doubtful accounts of $40,552 at March 31 and June 30 1,696,951 2,067,977 Other current assets 96,907 116,468 ------------ ------------ Total current assets 2,519,926 3,402,217 Property and equipment at cost, net 289,214 344,154 Land held for sale at cost 921,465 766,651 Intangible assets at cost, net 7,091,235 7,272,769 Other assets 55,145 38,700 ------------ ------------ Total assets $ 10,876,985 $ 11,824,491 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable to bank $ 350,000 $ 49,694 Note payable other 18,000 72,000 Trade accounts payable 621,074 365,638 Accrued salaries and wages 700,767 641,507 Other accrued expenses 678,856 683,954 Income taxes payable 94,565 Current portion of long term obligations to related party 2,250,000 1,500,000 Related party payable 183,701 ------------ ------------ Total current liabilities 4,618,697 3,591,059 Long term obligations to related party less current portion 1,875,000 3,000,000 Other liabilities 400,916 68,900 ------------ ------------ Total liabilities 6,894,613 6,659,959 ------------ ------------ Commitments and contingencies Stockholders' equity: Class B convertible preferred stock - authorized 50,000 shares of $.01 par value; none issued Common stock - authorized 6,250,000 shares of $.01 par value; 3,109,343 and 3,028,092 shares issued, respectively 31,094 30,281 Additional paid-in capital 10,446,284 10,300,847 Accumulated deficit (6,359,537) (5,031,127) Less 11,800 shares of common stock in treasury, at cost (135,469) (135,469) ------------ ------------ Total stockholders' equity 3,982,372 5,164,532 ------------ ------------ Total liabilities and stockholders' equity $ 10,876,985 $ 11,824,491 ============ ============
See Notes to Interim Condensed Consolidated Financial Statements. 3 4 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (unaudited)
Three Months Ended Nine Months Ended March 31 March 31 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Sales $ 3,723,945 $ 10,609,781 Cost of sales 2,620,576 7,503,141 ------------ ------------ Gross profit 1,103,369 3,106,640 Operating Expenses: Selling, general and administrative (1,325,485) $ (233,481) (3,837,935) $ (677,876) Amortization of intangible assets (90,061) (271,363) ------------ ------------ ------------ ------------ Loss from operations (312,177) (233,481) (1,002,658) (677,876) ------------ ------------ ------------ ------------ Other income (expense): Non-recurring gain from sales of securities 64,791 1,595,685 Loan commitment fee (300,000) Interest income 840 6,808 6,854 10,490 Interest expense (97,911) (293,903) (18,276) Other, net 301 318 ------------ ------------ ------------ ------------ Total (97,071) 71,900 (287,049) 1,288,217 ------------ ------------ ------------ ------------ Income (loss) from continuing operations before income taxes (409,248) (161,581) (1,289,707) 610,341 Provision for income taxes (12,628) (38,703) ------------ ------------ ------------ ------------ Income (loss) from continuing operations before discontinued operations (421,876) (161,581) (1,328,410) 610,341 Gain on sale of discontinued operations 493,425 361,137 Loss from discontinued operations (929) (54,766) ------------ ------------ ------------ ------------ Net income (loss) (421,876) 330,915 (1,328,410) 916,712 Accumulated deficit: Beginning of period (5,937,661) (4,555,727) (5,031,127) (5,141,524) ------------ ------------ ------------ ------------ End of period $ (6,359,537) $ (4,224,812) $ (6,359,537) $ (4,224,812) ============ ============ ============ ============ Income (loss) per share: From continuing operations $ (.14) $ (.11) $ (.44) $ .42 From discontinued operations ---- .33 ---- .21 ------------ ------------ ------------ ------------ Income (loss) per share $ (.14) $ .22 $ (.44) $ .63 ============ ============ ============ ============ Weighted average common and common equivalent shares outstanding 3,047,543 1,478,207 3,027,624 1,465,849 ============ ============ ============ ============
Primary and fully diluted income (loss) per share are the same for each period presented above, except for the nine months ended March 31, 1995, whereby fully diluted income (loss) per share from continuing operations, discontinued operations and net income was $.41, $.21 and $.62, respectively. See Notes to Interim Condensed Consolidated Financial Statements. 4 5 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (unaudited)
1996 1995 ----------- ----------- Operating activities: Net income (loss) $(1,328,410) $ 916,712 Adjustments to reconcile loss to net cash used in operating activities: Gains from sales of securities (1,595,685) Gain on sale of STI (361,137) Depreciation 137,253 20,957 Amortization 271,363 Changes in assets and liabilities: Accounts receivable 371,026 Other current assets 49,461 19,676 Other assets (16,445) 29,324 Trade accounts payable 255,436 1,370 Accrued expenses and other current liabilities 237,234 (14,190) Income taxes payable (94,565) Discontinued operations, net (174,544) ----------- ----------- Net cash used in operating activities (117,647) (1,157,517) ----------- ----------- Investing activities: Proceeds from sales of investments in securities 2,678,861 Purchase of investment in securities (1,043,176) Proceeds from sale of STI 800,000 Proceeds from exercise of options 19,688 Purchase of property and equipment (82,313) Payments relating to acquisition of Alliance and SD&A (58,050) ----------- ----------- Net cash provided by (used in) investing activities (140,363) 2,455,373 ----------- ----------- Financing activities: Proceeds from bank loans 350,000 Repayments of bank loans (49,694) (150,000) Proceeds from note payable other 1,000,000 Proceeds from land option 150,000 Repayments of notes payable other (54,000) (1,054,000) Repayment of related party obligations (750,000) (350,000) Proceeds from sales of common stock 120,000 ----------- ----------- Net cash used in financing activities (233,694) (554,000) ----------- ----------- Net increase (decrease) in cash and cash equivalents (491,704) 743,856 Cash and cash equivalents at beginning of period 1,217,772 419,149 ----------- ----------- Cash and cash equivalents at end of period $ 726,068 $ 1,163,005 =========== =========== Supplemental disclosures of cash flow data: Cash paid during the period for: Interest $ 120,589 $ 18,276 Loan commitment fee $ 300,000 Income tax paid $ 123,400
Supplemental non cash investing and financing activities information: The Company issued 37,500 shares of common stock valued at $150,000 in fiscal 1995 in settlement of a fiscal 1994 liability for early termination of a consulting agreement. In October 1995, in accordance with the acquisition agreement between Alliance Media Corporation and the former owner of SD&A the purchase price was increased by $85,699. In October 1995, the Company issued 6,250 shares of common stock in settlement of a liability of $26,250. In November 1995, a special county bond measure with principal totaling $154,814 was assessed on the Company's land and was recorded as a land improvement, offset by a liability in accrued other expenses. See Notes to Interim Condensed Consolidated Financial Statements. 5 6 ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited Interim Condensed Consolidated Financial Statements include the accounts of All-Comm Media Corporation and Subsidiaries (the "Company"). They have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair representation have been included. Operating results for the three and nine month period ended March 31, 1996 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended June 30, 1995. Certain reclassifications have been made in the fiscal 1995 interim financial statements to conform with the fiscal 1996 presentation. 2. NET INCOME PER COMMON SHARE Net income (loss) per common share is computed based upon the weighted average number of shares outstanding during the periods presented and common stock equivalents unless antidilutive. Primary and fully diluted income (loss) per share are the same in the periods presented, except as noted. 3. ACQUISITION OF ALLIANCE MEDIA CORPORATION AND STEPHEN DUNN & ASSOCIATES, INC. On April 25, 1995, the Company acquired all of the outstanding common shares of Alliance Media Corporation ("Alliance") and its wholly owned subsidiary, Stephen Dunn & Associates, Inc. ("SD&A"). These acquisitions were accounted for using the purchase method. The operating results of these acquisitions are included in the results of operations from the date of acquisition. 4. DISCONTINUED OPERATIONS On March 8, 1995, the Company completed the sale of Sports-Tech International ("STI") pursuant to a definitive agreement dated December 7, 1994. 6 7 Concurrent with the closing of the sale of STI, all operations of High School Gridiron Report ("HSGR") were ceased. Accordingly, STI and HSGR are reported as discontinued operations in fiscal 1995, and the consolidated financial statements have been reclassified to report separately the net assets, operating results, gain on disposition and cash flows of these operations. Revenues of these discontinued operations for the three and nine months ended March 31, 1995 were $73,906 and $1,147,829, respectively. 5. OTHER LIABILITIES On October 6, 1995, the Company entered into an option agreement with certain parties unrelated to the Company whereby, in consideration of payment to the Company of $150,000, the option holder may purchase undeveloped land in Laughlin, Nevada owned by the Company for $2.0 million. Under certain circumstances, the Company and the option holders have the right to, respectively, buy back or sell back the option. Also, as part of the transaction, the Company issued a warrant to the option holder to acquire a total of 30,000 shares of the Company's common stock at an exercise price of $2.50 per share. The payment has been treated as a current liability until expiration of the option or exercise of rights under the option provision. On April 9, 1996, the option period was extended from April 8, 1996 to July 8, 1996 and additional warrants were issued to acquire a total of 22,500 shares of the Company's common stock at an exercise price of $1.60 per share. In November 1995, a bond measure was passed by Clark County, Nevada authorities, resulting in a special assessment to fund improvements which will benefit the Company's land in Laughlin, Nevada. The principal balance assessed to the Company totals $154,814, plus interest at 6.4%, and is payable in semi-annual installments over twenty years. On April 29, 1996, the Company engaged a marketing firm to sell the land (see Note 12). 6. LONG TERM OBLIGATIONS TO RELATED PARTY In October 1995, the Company restructured its long term obligations relating to the acquisition of SD&A, whereby $375,000 and related interest payments due in the second quarter of fiscal 1996 became payable over a twelve month period commencing January, 1996 together with interest at 10%. In January, 1996 the Company initiated the negotiation of financing arrangements which required the terms of these obligations to be further modified whereby the $375,000 and related interest payments due January 1, 1996, principal and interest payments due January 1 and February 1, 1996 relating to the rescheduled October 1, 1995 payments and the February 1 and March 1, 1996 interest payments on the remaining debt were to become due on February 29, 1996, or at the time the Company completed its financing arrangements. Such arrangements were not completed by February 29, 1996. As such, the terms were further modified in order to pay the former owner accrued unpaid interest due from September 1, 1995 through a partial prepayment for June 1996 in the amount of $250,000. The funds were derived by borrowing $350,000 on a line of credit and $200,000 with interest at 10% from SD&A's former owner, which was loaned to the parent Company and is payable June 30, 1996. All other principal and interest payments due, including an April 1, 1996 principal 7 8 payment of $375,000, were rescheduled until the earlier of June 30, 1996, or at the time the Company completes satisfactory financing arrangements. 7. STOCK OPTIONS On November 3, 1995, the Board of Directors approved the increase in the number of shares available under the 1991 Stock Option Plan by 600,000 shares, to 850,000 shares. As of December 1, 1995, the Board of Directors of the Company granted options to purchase 407,003 shares of Common Stock to 90 officers and employees of the Company and its subsidiaries at $2.00 per share, the approximate fair market value of the Company's stock at that date. These options are exercisable over seven years. Options to purchase 389,921 shares of common stock are exercisable immediately. The remaining vest over periods of up to six years. None of these options have been exercised or canceled as of March 31, 1996. The Company intends to continue its policy of providing equity incentives to employees. 8. INCOME TAXES In the three and nine month periods ended March 31, 1996, the income tax provisions on continuing operations totaled $12,628 and $38,703, respectively, on losses from continuing operations of $409,248 and $1,289,707, respectively. The provisions resulted from state and local income taxes incurred on taxable income at the subsidiary level not reduced by losses incurred at other levels on which no tax benefits were available. The effective state tax rate of 13.6% is higher than the estimated state statutory rate of 10% due to reversal of deferred taxable income and increase in the tax valuation allowance. No provision was necessary on income from continuing operations for the three and nine months ended March 31, 1995 due to available net operating loss carryforwards. 9. TERMINATION OF POTENTIAL ACQUISITION In March, 1996, the Company entered into a stock purchase agreement to acquire the majority of outstanding stock of a privately-owned database marketing company. The agreement was subject to a number of conditions, including additional due diligence investigation and obtaining adequate financing. The agreement expired on March 31, 1996. 10. RELATED PARTY TRANSACTIONS In March 1996, the Company sold 75,000 shares of its common stock to related parties for $120,000. 11. NEW ACCOUNTING PROCEDURES Adoption of the Financial Accounting Standards Board ("FASB") Statement of Financial Accounting No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", which is effective for financial statements for fiscal years beginning after December 15, 1995, is not anticipated to have a material effect on the Company's consolidated financial statements. 8 9 The FASB recently issued Statement of Financial Accounting No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which is effective for financial statements for fiscal years beginning after December 15, 1995. SFAS 123 establishes new financial accounting and reporting standards for stock-based compensation plans. Entities will be allowed to measure compensation cost for stock-based compensation under SFAS 123 or APB Opinion No. 25, "Accounting for Stock Issued to Employees". Entities electing to remain with the accounting in APB Opinion No. 25 will be required to make pro forma disclosure of net income and earnings per share as if the provisions of SFAS 123 had been applied. The company is in the process of evaluating SFAS 123. The potential impact on the Company by adopting the new standard has not been quantified at this time. The Company must implement SFAS 123 no later than July 1, 1996. 12. SUBSEQUENT EVENTS The Company is currently in the process of privately placing an offering of equity securities and convertible debentures. If completed, the proceeds will be used to reduce amounts payable to the former owner of SD&A, for general corporate purposes and, if sufficient, to finance a possible future acquisition. There can be no assurance, however, that the private placement will be completed. On April 4, 1996 SD&A borrowed $200,000 from its former owner at 10%, payable June 30, 1996. On April 29, 1996, the Company entered into an agreement with a real estate marketing agency to effect the sale of the Company's undeveloped land in Laughlin, Nevada. The agreement calls for the agency to dispose of the property through a negotiated private sale or a public auction on or before June 30, 1996. On May 9, 1996, the Company completed the private placement of 10,000 shares of convertible preferred stock for $750,000 with an institutional investor, less fees and closing costs estimated to be $75,000. The convertible preferred stock is convertible into common shares of the Company at the lesser of the price paid per share divided by $2.50, or 80% of the closing bid price of the company's common stock for the five trading days immediately prior to the conversion date, and is subject to certain restrictions. The holder of shares of convertible preferred stock shall be entitled to receive cumulative annual dividends at the rate of $3.75 per share per annum payable in stock and/or cash, at the sole discretion of the Company. In connection with the transaction, the Company will issue warrants for 100,000 shares of common stock exercisable at $3.00 for four years. 9 10 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction This discussion summarizes the significant factors affecting the consolidated operating results, financial condition and cash flows of the Company for the three and nine month periods ended March 31, 1996. This should be read in conjunction with the financial statements and notes thereto, included in this Report on Form 10-Q and the Company's financial statements and notes thereto, included in the Company's Annual Report on Form 10-K for the year ended June 30, 1995. As more fully described in Footnote 3 to the consolidated financial statements included in the Company's 1995 Annual Report on Form 10-K, on April 25, 1995, the Company purchased 100% of the stock of Alliance Media Corporation which had simultaneously acquired Stephen Dunn & Associates, Inc. The management and board of directors of Alliance were elected as management and board of directors of the Company and the former management and directors ceased their association with the Company. These acquisitions have been reflected in the consolidated financial statements using the purchase method of accounting. Accordingly, the Consolidated Statement of Operations and Consolidated Statement of Cash Flows include the operations of Alliance and SD&A from April 25, 1995. Also, as more fully described in Footnote 5 to the consolidated financial statements included in the Company's 1995 Annual Report on Form 10-K, in fiscal 1995, the Company discontinued the operations of Sports-Tech International, Inc. and High School Gridiron Report. In December, 1994 the Company agreed to sell Sports-Tech International and closed the HSGR operation. The Consolidated Financial Statements have been reclassified to report the net assets, operating results, gain on disposition and cash flows of these operations as discontinued operations. With the disposition of the STI operations, closure of the HSGR operations, and the acquisition of Alliance and change of management and directors, the Company is now operating as a direct marketing services provider with its initial concentration in a telemarketing and telefundraising company that specializes in direct marketing services for the arts, educational and other institutional tax-exempt organizations. Results of Operations for the three month period ended March 31, 1996, compared to the three month period ended March 31, 1995 Continuing Operations: Sales and cost of sales totaled approximately $3,724,000 and $2,621,000, respectively, for the three months ended March 31, 1996 (the "current period") as compared with no similar amounts incurred in the three months ended March 31, 1995 (the "prior period"). These increases are due to the inclusion of SD&A operations for the current period. In the current period, net sales from telemarketing and telefundraising totaled $3,134,000 and sales from off-site campaigns totaled $590,000. Due to the seasonal nature of SD&A's telemarketing and telefundraising business, revenues and cost of sales have increased in the current quarter as compared to $2,959,000 and $2,250,000 in the quarter ended December 31, 1995 (the "last" or "prior" quarter) and are expected to increase again in the next fiscal quarter. Historically, telemarketing and telefundraising revenues are seasonal in 10 11 nature, with a substantially larger portion of revenues and profits occurring in the first and fourth fiscal quarters. Cost of sales represents labor, telephone and mailing expenses directly related to telemarketing, telefundraising and off-site campaign services. As a percentage of relative net sales, gross profit relating to telemarketing and telefundraising and off-site campaigns totaled 29% and 46%, respectively, for the current period. In the prior quarter, gross profit relating to telemarketing and telefundraising and offsite campaigns totaled 23% and 26%, respectively. The increase is due to calendar year end incentive bonuses paid to SD&A employees in excess of amounts accrued in prior periods, as well as a shift in the mix of the business, which coincides with the historical seasonal nature of the business. Selling, general and administrative expenses include all selling, general and administrative expenses of SD&A and the expense of central services the Company provides to manage its divisional operation, SD&A, and previously its discontinued operations, STI and HSGR, and include corporate management, accounting and finance, general administration and legal services. As a result of the Company's new corporate strategy, it now also includes expenses relating to the identification, evaluation and negotiation of potential acquisitions and required financing arrangements. As a result of these activities, corporate general and administrative expenses increased $1,092,000 to $1,325,000 in the current period, as compared with $233,000 in the prior period. Approximately $918,000 of the increase resulted from the inclusion of SD&A selling, general and administrative expenses for the current period, which did not exist prior to the merger with Alliance Media, and salary expenses associated with the new management and employees who joined the Company upon resignation of the prior management and its board of directors which caused $98,000 of the increase. Legal expenses decreased $32,000 while accounting and tax fees have increased approximately $34,000 in the current period. Prior year expenses included investigation of the pending Alliance merger. Current period expenses include efforts involved in the planning and execution of the new corporate strategy, acquisition related due diligence and related legal document preparation. The Company incurred $20,000 in costs to secure a financing source in the current period. Consulting, directors' fees and public relations increased by $9,000 due to efforts involved in implementing the Company's new strategy. Amortization of prepaid directors and officers insurance premium increased approximately $7,000 due to an increase in coverage. Rent, office expenses and depreciation expense increased by approximately $7,000 as the Company began to close down its offices in the prior period with the sale of STI, its only active subsidiary. Other expenses including travel, postage, delivery, auto and telephone increased by $31,000, principally due to the Company's new corporate strategy and related acquisition and due diligence matters. General and administrative expenses decreased approximately $63,000 to $1,325,000, as compared with the prior quarter. SD&A expenses decreased by approximately $104,000, principally due to higher than budgeted year end bonuses and severance in the prior quarter, as well as seasonal year end costs. Corporate level expenses increased by approximately $41,000 principally from acquisition related due diligence. 11 12 Loss before interest, taxes, depreciation and amortization totaled approximately $176,000 in the current quarter, as compared with $566,000 in the prior quarter. Pretax operating income associated with the SD&A operation totaled approximately $197,000 in the current quarter. Pretax corporate expenses totaled approximately $606,000, including $187,000 in corporate depreciation, amortization and interest expense. Pretax operating loss from the SD&A operation totaled approximately $245,000 in the prior quarter and corporate expenses totaled $553,000, including $190,000 in corporate depreciation, amortization and interest. Amortization of intangible assets totaled approximately $91,000 in the current and prior quarter and related to the amortization of the covenant-not-to-compete and goodwill, over five years and forty years, respectively, acquired in the Alliance and SD&A transaction. A non-recurring net gain from sales of securities totaled approximately $65,000 in the prior period and resulted from disposal of shares acquired by the exercise of a common stock purchase warrant held as an investment. See the related discussion for the nine month periods ended March 31, 1996 and 1995 for additional information. Interest expense increased approximately $98,000 in the current period and related to the acquisition of $4,500,000 of debt in the Alliance and SD&A acquisition and is comparable to the $97,000 incurred in the prior quarter. In the current period, the income tax provision on continuing operations totaled $13,000 on losses from continuing operations of $409,000. The income tax provision resulted from state and local taxes incurred on taxable income at the subsidiary level not reduced by losses at other levels on which no tax benefits were available. Discontinued Operations: The gain on sale of, and loss from, discontinued operations in the prior period relates to the STI and HSGR operations which were either sold or closed in fiscal 1995. No amounts related to discontinued operations were incurred in the current period. Results of Operations for the nine months ended March 31, 1996, compared to the nine months ended March 31, 1995 Continuing Operations: Sales and cost of sales totaled approximately $10,610,000 and $7,503,000, respectively, for the nine months ended March 31, 1996 (the "current period") as compared with no similar amounts incurred in the nine months ended March 31, 1995 (the "prior period"). These increases are due to the inclusion of SD&A operations for the current period. In the current period, net sales from telemarketing and telefundraising totaled $8,866,000 and sales from off-site campaigns totaled $1,744,000. Cost of sales represents labor and telephone expenses directly related to telemarketing, telefundraising and off-site campaign services. As a percentage of 12 13 relative net sales, gross profit relating to telemarketing and telefundraising and off-site campaigns totaled 28% and 36%, respectively, for the current period. General and administrative expenses increased $3,160,000 to $3,838,000 in the current fiscal period as compared with $678,000 in the prior period. Approximately $2,737,000 of the increase resulted from the inclusion of SD&A selling, general and administrative expenses for the current period, which did not exist before the merger with Alliance Media, and salary expenses associated with the new management and employees who joined the Company upon resignation of the prior management and its board of directors which caused $270,000 of the increase. Legal expenses decreased $60,000 in the current period. Prior year expenses included preliminary preparation of a registration statement and investigation of the pending Alliance merger. Current period expenses included finalization of issues related to prior operations of the Company, as well as efforts involved in the planning and execution of the new corporate strategy, including acquisition related document preparation. Consulting, directors' fees and public relations increased by $52,000 due to efforts involved in implementing this strategy. Accounting and tax fees have increased approximately $97,000 due to reporting requirements surrounding the acquisition of Alliance and SD&A, the disposition of STI, a special valuation project and acquisition related due diligence. Amortization of prepaid directors and officers insurance premium increased approximately $21,000 due to an increase in coverage. The Company incurred $20,000 in costs to investigate a financing source in the current period. Rent, office expenses and depreciation expense decreased by $15,000 as the Company maintained two corporate offices in the prior period and now only maintains one. Transfer agent costs increased $13,000 principally due to work performed in conjunction with issuing shares under the Company's one for four reverse stock split. Other expenses including travel, postage, delivery, auto and telephone increased by $25,000 principally due to the Company's new corporate strategy and related acquisition and due diligence matters. Loss before interest, taxes, depreciation and amortization totaled approximately $594,000 in the current nine month period. Pretax operating income from SD&A operations totaled approximately $369,000 in the current nine month period and corporate expenses totaled $1,372,000, including $562,000 in corporate depreciation, amortization and interest expense. Amortization of intangible assets totaled approximately $271,000 in the current period and related to the amortization of the covenant-not-to-compete and goodwill, over five years and forty years, respectively, acquired in the Alliance and SD&A transaction. A non-recurring net gain from sales of securities totaled $1,596,000 in the prior period and resulted from the exercise by the Company of a common stock purchase warrant held as an investment. In July, 1994, the Company borrowed $1,000,000 to fund the exercise of the warrant. The loan was collateralized by a pledge of the warrant shares pursuant to the terms of a pledge agreement. The parties to the $1,000,000 loan included, among others, the Company's former chairman, former president, a former director and a shareholder, who each provided $200,000. The 13 14 other lenders were non-affiliates. The lenders received the repayment of the $1,000,000 loan, interest at 7.75% totaling $9,000 and a $300,000 commitment fee from the proceeds of the subsequent stock sales. The $300,000 loan commitment fee was an inducement to this group of investors, who are no longer associated with the Company, to provide the money necessary to exercise the warrant before its expiration on July 31, 1994. Interest expense increased approximately $276,000 in the current period and related to the acquisition of $4,500,000 of debt in the Alliance and SD&A acquisition. In the current period, the income tax provision on continuing operations totaled approximately $39,000 on losses from continuing operations of approximately $1,290,000. The effective state tax rate of 13.6% on taxable income is higher than the estimated state statutory rate of 10% due to reversal of deferred taxable income and increase in the tax valuation allowance. The provision resulted from state and local taxes incurred on taxable income at the subsidiary level not reduced by losses incurred at other levels on which no tax benefits were available. Discontinued Operations: The gain on sale of, and loss from, discontinued operations in the prior period relates to the STI and HSGR operations which were either sold or closed in fiscal 1995. No amounts related to discontinued operations were incurred in the current period. Capital Resources and Liquidity During the nine month period ended March 31, 1995 the Company used net cash in operations of approximately $1,158,000 and $1,054,000 to pay down notes payable. The Company financed these cash needs through the sale of equity investments which totaled $2,679,000 and borrowings of $1,000,000. As previously discussed, these equity securities were acquired when the Company exercised a common stock purchase warrant for payment of $1,000,000. In the current period, the Company used net cash for operating activities of approximately $118,000. Due to seasonal decreases in sales, accounts receivable relating to the SD&A operation have decreased $371,000 in the current period. Trade accounts payable and accrued liabilities have increased $493,000, principally due to acquisition, financing and other professional fees. Additional cash was used in the current period at the corporate and SD&A level to pay $750,000 of obligations due to the sole selling shareholder arising from the acquisition of SD&A, $104,000 to pay down note and loan obligations and $140,000 to pay for fixed assets and acquisition related costs. The Company increased its cash balances by entering into an option agreement whereby, in consideration of a cash payment to the Company of $150,000, the option holder may purchase the Company's undeveloped land in Laughlin, Nevada, for $2,000,000. Under certain conditions, the Company and the Option Holders have the right to, respectively, buy back or sell back the option. This agreement expired on April 8, 1996, and was extended until July 8, 1996. The Company is seeking additional cash resources through the sale of this land. 14 15 In March 1996, the Company sold 75,000 shares of its common stock to related parties for $120,000. In October 1995, the long term obligations due to the sole selling shareholder of SD&A were restructured so that the October 1, 1995 payment of $375,000 and interest due in the second quarter of fiscal 1996 was to be paid over a twelve month period commencing January 1996, together with interest at 10%. In January, 1996 the terms of these obligations were further modified whereby the $375,000 and related interest payments due January 1, 1996, principal and interest payments due January 1 and the February 1 and March 1, 1996 relating to the deferred October 1, 1995 payments and February 1, 1996 interest payment on the remaining debt were due on February 29, 1996, or earlier, if the Company completed certain financing arrangements. Such arrangements were not completed by February 29, 1996 and the terms were further modified whereby SD&A, by borrowing $350,000 on its line of credit and $200,000 with interest at 10% from its former owner, loaned the parent Company $500,000, payable June 30, 1996. $250,000 of the loan was used to pay the former owner accrued interest due him from September 1, 1995 through a partial prepayment for June 1996. The January 1, 1996 and April 1, 1996 principal payments, as well as all principal and interest payments due monthly from January 31, 1996 to May 31, 1996 were deferred until June 30, 1996, or earlier, if the Company completes certain financing. As per the modified agreement, if the amounts due the former owner, totaling approximately $977,000, and the amounts due to SD&A by the parent Company, totaling approximately $555,000, are not paid in full by June 30, 1996, certain buyback provisions are triggered without a grace period, allowing the former owner to repurchase the SD&A shares from the Company. An additional principal payment of $375,000 is due on July 1, 1996 to the former owner of SD&A. In March, 1996 the Company entered into a stock purchase agreement to acquire the majority of the outstanding stock of a privately-owned database marketing company. The agreement was subject to a number of conditions, including additional due diligence investigation and obtaining adequate financing. The agreement expired on March 31, 1996. The Company is currently in the process of privately placing equity securities and convertible debentures. Subject to its completion, the proceeds will be used to reduce principal and interest amounts payable to the former owner of SD&A, for general corporate purposes and, if sufficient, to finance a possible future acquisition. There can be no assurance, however, that the private placement will be completed. On May 9, 1996, the Company completed the private placement of 10,000 shares of convertible preferred stock for $750,000 with an institutional investor, less fees and closing costs estimated to be $75,000. The convertible preferred stock is convertible into common shares of the Company at the lesser of the price paid per share divided by $2.50, or 80% of the closing bid price of the company's common stock for the five trading days immediately prior to the conversion date, and is subject to certain restrictions. The holder of shares of convertible preferred stock shall be entitled to receive cumulative annual dividends at the rate of 15 16 $3.75 per share per annum payable in stock and/or cash, at the sole discretion of the Company. In connection with the transaction, the Company will issue warrants for 100,000 shares of common stock exercisable at $3.00 for four years. The Company believes that funds available from operations, from the prospective sale of the Laughlin land and the ongoing ability to raise funds through private placements of equity or debt securities will be adequate to finance its operations and meet interest and debt obligations in the next twelve months. There can be no assurance, however, that subsidiary operations will generate sufficient cash flows, that the revolving line of credit will be finalized, that the Laughlin, Nevada land will be sold, or that funds will be available through a private placement of equity or debt securities at terms acceptable to the Company, if at all. Also, if funds are not available on a timely basis, the Company may seek to negotiate the modification of debt obligations, as well as effecting reductions in corporate expenses to meet its cash needs. The Company is also currently involved in acquisition discussions with various entities. The Company expects these acquisitions will require cash payments, plus issuance of common stock and notes payable to the sellers, as well as contingent payments based on future operating profits and performance. Such acquisitions will be dependent on market conditions to the extent the Company intends to finance the cash portions of the purchase prices of these acquisitions, as well as to obtain additional working capital, through the issuance of common or preferred stock and/or convertible indebtedness. Although the Company believes that it will be successful in obtaining the financing necessary to complete the acquisitions now contemplated, and those in the future, there can be no assurance that such capital will be available at terms acceptable to the Company, or at all, or that acquisitions will be completed. New Accounting Pronouncements Adoption of the Financial Accounting Standard Board ("FASB") Statement of Financial Accounting No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", which is effective for financial statements for fiscal years beginning after December 15, 1995, is not anticipated to have a material effect on the Company's consolidated financial statements. The FASB recently issued Statement of Financial Accounting No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which is effective for financial statements for fiscal years beginning after December 15, 1995. SFAS 123 establishes new financial accounting and reporting standards for stock-based compensation plans. Entities will be allowed to measure compensation cost for stock-based compensation under SFAS 123 or APB Opinion No. 25, "Accounting for Stock Issued to Employees." Entities electing to remain with the accounting in APB Opinion No. 25 will be required to make pro forma disclosure of net income and earnings per share as if the provisions of SFAS 123 had been applied. The Company is in the process of evaluating SFAS 123. The potential impact on the Company by adopting the new standard has not been quantified at this time. The Company must implement SFAS 123 no later than July 1, 1996. 16 17 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On August 22, 1995, the Company held a Special Meeting of Shareholders to vote on management's proposal to amend the Company's Amended and Restated Articles of Incorporation to change the name of the Company to All-Comm Media Corporation. The shares voted were as follows, after giving effect to the one-for-four reverse stock split: For 2,022,870 Against 1,946 Abstentions 2,725 Broker non-votes None
17 18 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K A) Exhibits 3. Certificate of Amendment to the Articles of Incorporation (a) 10. Option Agreement (b) 10.5 Amendment to Option Agreement 10.6 Memorandums of Understanding 11. Statement Regarding Computation of Net Income per Share 27. Financial Data Schedule (a) Incorporated by reference from Exhibit 3(iii) to the Company's Form 10-K for the year ended June 30, 1995. (b) Incorporated by reference from Exhibit 10.4 to the Company's Form 10-K for the year ended June 30, 1995. B) Reports on Form 8-K 1. On October 23, 1995, the Company disclosed the closing of an Option Agreement for the purchase of the Company's undeveloped land in Laughlin, Nevada for $2,000,000. 18 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALL-COMM MEDIA CORPORATION. (Registrant) By /s/ Barry Peters -------------------------------------------- Barry Peters Chairman of the Board and Chief Executive Officer Date: May 13, 1996 19 EX-10.5 2 AMENDED OPTION AGREEMENT 1 Exhibit 10.5 April 9, 1996 Messrs. Gerald Yellin, Joseph LaRocca and Augustus LaRocca c/o Bear Stearns & Co., Inc. 245 Park Avenue New York, NY 10167 Re: Option Agreement dated October 1, 1995 - Amendment Gentlemen: This letter will serve to confirm our understanding that the Option Agreement on the land in Laughlin, NV has expired. It is hereby agreed that All-Comm Media shall pay the amount due under the put ($150,000) on July 8th, 1996, instead of April 8, 1996. In consideration for the extension, All-Comm shall pay $7,500 in interest and issue a warrant certificate for 22,500 shares of the Company's common stock, at an exercise price of $1.60 per share. If this is your understanding, please execute and return one copy of this letter. Thank you. Sincerely, /s/ E. William Savage - - ---------------------- E. William Savage President & COO Agreed by: /s/ Gerald Yellin ------------------------------------ Gerald Yellin BP/ac /s/ Augustus LaRocca ------------------------------------ Augustus LaRocca /s/ Joseph LaRocca ------------------------------------ Joseph LaRocca 20 EX-10.6 3 MEMORANDUM OF UNDERSTANDING 1 Exhibit 10.6 ALL-COMM MEDIA CORPORATION MEMORANDUM OF UNDERSTANDING - - -------------------------------------------------------------------------------- This is to confirm our understanding that we hereby agree to amend the payments due to Stephen Dunn from All-Comm Media Corporation in the following manner: 1. The stated principal payment of $375,000 due October 1, 1995 is hereby agreed to be amortized and paid over a 12-month period commencing January 1996, at a rate of 10 percent interest per annum. The 12 month payments will be $33,792.67 or $405,512.04 in the aggregate A schedule attached hereto. 2. The interest payments of approximately $30,000 per month due on October 1, 1995, November 1, 1995 and December 1, 1995, are hereby agreed to be paid upon the earlier of: (i) the date that All-Comm Media Corporation consummates a proposed financing of its unimproved real property located in Laughlin, Nevada; or (ii) the date that All-Comm Media Corporation consummates any equity financing in excess of $500,000; or (iii) if neither (i) nor (ii) above is accomplished by December 31, 1995, the sum of the interest payments then due shall be amortized and paid, with interest at ten percent per annum, over a twelve month period commencing in January, 1996 in the same manner as the principal payments in Paragraph 1. Above. The unpaid sum of interest payments so deferred shall be paid in full, with interest, on the date of any financing of the Laughlin, Nevada property or of any property or of any All-Comm Media Corporation equity financing in excess of $500,000. 3. The parties agree that the "Excess Net Worth Payment" shall be equal to $375,000 and that Stephen Dunn shall be entitled to be paid such amount forthwith by Stephen Dunn & Associates, Inc. Notwithstanding any other covenant or agreement on the part of Stephen Dunn to the contrary contained in the Stock Purchase Agreement, the Operating Covenants Agreement or any other agreement between the parties hereto. 4. Other than the above amendments, and such specific conditions as may apply to the interest rate change and changes in the due dates of principal and interest, the terms of the payments due Stephen Dunn by All-Comm Media Corporation shall remain unchanged. Agreed and accepted Agreed and accepted this 1st day of October, 1995 this 1st day of October, 1995 by: /s/ E. William Savage by: /s/ Stephen Dunn ---------------------------- ------------------------------- E. William Savage, President Stephen Dunn and Chief Operating Officer All-Comm Media Corporation 21 2 PRINCIPAL PAYMENT AMORTIZATION SCHEDULE Principal: $375,000 due October 1, 1995 Interest Rate: 10% per annum on unpaid principal Payment Schedule: No payments through December 31, 1995. Principal and interest payable in 12 equal monthly installments thereafter. Principal and interest due at December 31, 1995 is $384,375.
1996 Payments: Date Principal Interest Total ---------------------------------------------------------------- 01/31/96 $30,589.55 $3,203.12 $33,792.67 02/29/96 $30,844.46 $2,948.21 $33,792.67 03/31/96 $31,101.50 $2,691.17 $33,792.67 04/30/96 $31,360.67 $2,432.00 $33,792.67 05/31/96 $31,622.01 $2,170.66 $33,792.67 06/30/96 $31,885.53 $1,907.14 $33,792.67 07/31/96 $32,151.24 $1,641.43 $33,792.67 08/31/96 $32,419.17 $1,373.50 $33,792.67 09/30/96 $32,689.33 $1,103.34 $33,792.67 10/31/96 $32,961.74 $ 830.93 $33,792.67 11/30/96 $33,236.42 $ 556.25 $33,792.67 12/31/96 $33,513.38 $ 279.29 $33,792.67 ----------- ----------- ----------- TOTALS: $384,375.00 $21,137.04 $405,512.04
22 3 ALL-COMM MEDIA CORPORATION SECOND MEMORANDUM OF UNDERSTANDING - - -------------------------------------------------------------------------------- This is to confirm our understanding that we hereby agree to amend for a second time certain of the provisions of that certain Stock Purchase Agreement, dated January 31, 1995 (the "Purchase Agreement"), between All-Comm Media Corporation (formerly Alliance Media Corporation) (hereinafter "All-Comm") and Stephen Dunn (hereinafter "Dunn") in each of the following respects: 1. Notwithstanding the provisions of Section 2.1(t) of the Operating Covenants Agreement (as defined in Section 2(e) of the Purchase Agreement), Dunn agrees to cause Stephen Dunn & Associates, Inc. (Hereinafter SD&A") to enter into a tax allocation agreement (hereinafter the "Tax Treaty") with All-Comm, effective retroactive to April 25, 1995, pursuant to which All-Comm's actual federal and state income tax liability for all past and future fiscal periods, as determined in good faith by Coopers & Lybrand and approved by Dunn (which approval shall not be unreasonably withheld), will be allocable between SD&A and All-Comm and each of All-Comm's other subsidiaries, if any. 2. Notwithstanding the provisions of Section 2.1(a) of the Operating Covenants Agreement, Dunn agrees that SD&A will make a cash distribution to All-Comm in an amount equal to $125,000 concurrently with the execution and delivery of this document by the parties. In this regard, Dunn and All-Comm acknowledge and agree that such $125,000 payment may be greater or less than the amount of federal and state income tax liability properly allocable to SD&A for all fiscal periods through and including December 31, 1995 pursuant to the Tax Treaty to be entered into between SD&A and All-Comm pursuant to the provisions of Section 1 hereof. 3. All-Comm and Dunn agree that, for purposes of determining SD&A's Working Capital and Working Capital Limit (as such terms are defined in Section 2.1(a) of the Operating Covenants Agreements) pursuant to the provisions of Sections 2.1(a) and 2.2(a) of Operating Covenants Agreement, SD&A shall only be required to calculate and record its actual federal and state income tax liability as part of a consolidated group pursuant to the Tax Treat as opposed to calculating and recording its federal and state income tax liability as a stand-alone entity. 4. From and after the Substantial Payment Date (as defined in Section 4.2 of the Operating Covenants Agreement), Dunn hereby agrees that the interest rate on all payments due from All-Comm to Dunn pursuant to Section 2(a) (ii) of the Purchase Agreement and Exhibit 2(a) (ii) to the Purchase Agreement shall be reduced to the lesser of: (a) eight percent (8%) simple interest non-compounded per annum; or (b) the simple interest rate per annum non-compounded announced, from time to time, by Bank of America NT&SA, at its downtown Los Angeles, California headquarters, as its "prime" or "reference" rate. 5. Notwithstanding any contrary provision in the Purchase Agreement or the Operating Covenants Agreement, Dunn hereby agrees to cause SD&A to pay the amount of the invoices heretofore submitted by Coopers & Lybrand to All-Comm whether or not such invoiced amounts are properly allocable to SD&A as opposed to All-Comm pursuant to the Purchase Agreement and/or the 23 4 Operating Covenants Agreement. Notwithstanding the foregoing, such payment by SD&A shall not affect, in any manner whatsoever, the calculation of SD&A's pre-tax earnings pursuant to the provisions of Section 2(f) (ii) (B) of the Purchase Agreement for the first Post-Closing Year (as defined in Section 2(d) of the Purchase Agreement). 6. Notwithstanding any contrary provisions set forth in Section 4.1 of the Operating Covenants Agreements, All-Comm hereby agrees that the amount to be payable by Dunn pursuant to such Section 4.1 of the Operating Covenants Agreement as the repurchase price for the Shares (as defined in recital A of the Operating Covenants Agreement) shall be credited by an amount equal to the sum of: (a) the $125,000 distributed by SD&A by All-Comm pursuant to Section 2 of this document; and (b) all amounts paid by SD&A to All-Comm pursuant to Section 5 of this document to the extent that such amounts exceed the amounts properly allocable to SD&A as opposed to All-Comm pursuant to the Purchase Agreement and/or the Operating Covenants Agreement as determined in good faith by Coopers & Lybrand and approved by Dunn (which approval shall not be unreasonably withheld). 7. In consideration of Dunn's agreements set forth in Sections 1 through 6 hereof, All-Comm agrees to use its best efforts to raise $7,500,000 in additional financing pursuant to a private placement of its notes and warrants to sophisticated investors located by Cruttenden Roth and, upon the successful consummation of such private placement as shall be necessary to cause the Substantial Payment Date to have occurred as a result of such payments and/or prepayments. 8. Except as set forth herein, all of the terms and provisions of the Purchase Agreement and the Operating Covenants Agreement, as heretofore amended, between All-Comm and Dunn shall remain in full force and effect. Agreed and accepted Agreed and accepted as of January 9, 1996 as of January 9, 1996 ALL-COMM MEDIA CORPORATION (formerly Alliance Media Corporation) By: /s/ E. William Savage By: /s/ Stephen Dunn ------------------------------ ------------------------------ E. William Savage, President Stephen Dunn and Chief Operating Officer 24 5 ALL-COMM MEDIA CORPORATION AMENDMENT TO SECOND MEMORANDUM OF UNDERSTANDING This is to confirm our understanding that we hereby amend the Second Memorandum of Understanding dated January 9, 1996 between All-Comm Media Corporation and Stephen Dunn in the following manner: The stated principal payment of $375,000 due January 1, 1996 and related interest thereto is hereby agreed to be due and payable on the earlier of February 29, 1996 or the Substantial Payment Date referred to in Paragraph 7 of the Second Memorandum of Understanding. Except as set forth herein, all of the terms and provisions of the Purchase Agreement and the Operating Covenants Agreement, as heretofore amended, between All-Comm Media Corporation and Stephen Dunn remain in full force and effect. Agreed and accepted Agreed and accepted as of January 9, 1996 as of January 9, 1996 ALL-COMM MEDIA CORPORATION By: /s/ E. William Savage /s/ Stephen Dunn ----------------------------- ------------------------------------ E. William Savage, President Stephen Dunn and Chief Operating Officer 25 6 ALL-COMM MEDIA CORPORATION THIRD MEMORANDUM OF UNDERSTANDING - - -------------------------------------------------------------------------------- This is to confirm our understanding that we hereby agree to amend for a third time, effective as of February 29, 1996 and in memorialization of the agreements reached as of such date, certain of the provisions of that certain Stock Purchase Agreement, dated January 31, 1995 (the "Purchase Agreement"), between All-Comm Media Corporation (formerly Alliance Media Corporation) (hereinafter "All-Comm") in each of the following respects: 1. Notwithstanding any contrary provisions contained in Sections 2.1 or 2.2 of the Operating Covenants Agreement (as defined in Section 2 (e) of the Purchase Agreement), Dunn agrees to cause Stephen Dunn & Associates, Inc. (Hereinafter "SD&A") to loan All-Comm an additional $500,000 on or prior to April 5, 1996. Such loan shall: (i) bear interest on unpaid principal at a rate equal to 10% per annum; and (ii) be all due and payable on the earlier of June 30, 1996 or 10 days after the date that All-Comm successfully completes its proposing financing through Cruttenden Roth. Stephen Dunn may loan a portion of such $500,000 from his personal funds, which loan shall also bear interest on unpaid principal at a rate equal to 10% per annum and shall also be due and payable by no later than June 30, 1996. In consideration of such $500,000 loan, All-Comm agrees to pay Dunn a $3,257.36 loan processing fee in accordance with the provisions of Section 2 hereof. 2. All-Comm hereby agrees that $250,000 of such $500,000 loan shall be used to pay Stephen Dunn $250,000 in accrued but unpaid interest due him, as a prepayment of interest to be due him pursuant to the Purchase Agreement and in satisfaction of the $3,257.36 loan processing fee described in Section 1 hereof, all as set forth in Schedule "A" attached hereto. The remaining $250,000 of such $500,000 loan shall be used by All-Comm to pay professional fees which are more than 90 days in age, make certain payments due with respect to All-Comm's Laughlin real property and/or provide working capital for All-Comm's corporate staff. 3. All-Comm and Dunn hereby agree that SD&A shall be responsible for paying or reimbursing Dunn for all legal and accounting fees and expenses incurred by Dunn after April 25, 1995 which relate to: (a) any discussions and/or negotiations resulting in any amendments or proposed amendments to the Purchase Agreement, the Operating Covenants Agreement and/or any other agreement between All-Comm and Dunn; or (b) the issue of whether or not it was advisable for All-Comm to make an election pursuant to Section 338 of the Internal Revenue Code as a result of All-Comm's acquisition of the SD&A stock from Dunn and the effects of such election on SD&A and/or Dunn (collectively the "Post-Closing Professional Expenses"). 4. Notwithstanding any contrary provisions contained in Section 4.1 of the Operating Covenants Agreement, All-Comm hereby agrees that the amount to be payable by Dunn pursuant to such Section 4.1 of the Operations Covenants Agreement as the repurchase price for the Shares (as defined in Recital A of the Operating Covenants Agreement) shall, in addition to the credits referred to in Section 6 of the parties' Second Memorandum of Understanding, dated January 9, 1996, as itself amended (collectively the "Second Memorandum"), but subject to the provisions of Section 6 hereof, be further credited by an 26 7 amount equal to the sum of: (i) the $500,000 (and all accrued interest thereon) loaned by SD&A to All-Comm pursuant to Section 2 of this document; (ii) the $35,000 (and all accrued but unpaid interest thereon) heretofore loaned by SD&A to All-Comm pursuant to that certain Promissory Note, dated February 15, 1996; (iii) an amount equal to 10% per annum on the $125,000 heretofore advanced by SD&A to All-Comm pursuant to Section 2 of the Second Memorandum, from the date of such advance through June 30, 1996; and (iv) the aggregate amount of the Post-Closing Professional Expenses as determined pursuant to Section 7 below. All-Comm and Dunn hereby further reconfirm that, in the event that Dunn exercises his repurchase rights in respect of the Shares pursuant to Section 4.1 of the Operating Covenants Agreements after a default by All-Comm pursuant to Section 5 hereof or any other default, neither Dunn or SD&A, on the one hand, nor All-Comm, on the other hand, shall have any further rights or obligations to the other party or parties under the Purchase Agreement, as heretofore and herein amended, the Operating Covenants Agreements, as heretofore and herein amended, any employment agreement between SD&A and Dunn or otherwise. 5. Notwithstanding any contrary provisions contained in the Purchase Agreement, the Operating Covenants Agreement or any other agreement or amendment thereto between All-Comm and Dunn, All-Comm and Dunn hereby agree that: (i) except as specifically provided in Section 2 hereof, All-Comm shall not be obligated to pay any installments of principal and/or interest otherwise due Dunn pursuant to the Purchase Agreement prior to June 30, 1996 (or previously deferred pursuant to any prior amendment thereto) until the earlier of June 30, 1996 or 10 days after the closing of the proposed Cruttenden Roth financing referred to in Section 7 of the Second Memorandum or the closing of any other financing in lieu of such Cruttenden Roth financing; and (ii) All-Comm shall be deemed to be in default in respect of its obligation to Dunn if such principal and/or interest payments are not paid by June 30, 1996 (notwithstanding the 60-day grace period otherwise provided for in the Purchase Agreement, the Operating Covenants Agreement or any other agreement between All-Comm and Dunn) which, among other things, shall thereafter entitle Dun to repurchase the SD&A shares from All-Comm pursuant to Section 4.1 of the Operating Covenants Agreement. Notwithstanding the foregoing provisions of this Section 5, all interest accruals on unpaid installments of principal and/or interest on all obligations of All-Comm due Dunn pursuant to the Purchase Agreement, as heretofore and herein amended, shall continue to accrue as set forth in the applicable provision of the Purchase Agreement, as heretofore and herein amended. 6. All-Comm and Dunn agree that the allocation between SD&A and All-Comm of the $77,595 in accounting fees heretofore paid directly by SD&A to Coopers & Lybrand on All-Comm's behalf (or advanced by SD&A to All-Comm for purpose of paying such accounting fees) in respect of All-Comm's most recently-completed fiscal year, as required by Section 6 of the Second Memorandum, shall be determined in good faith by Coopers & Lybrand and approved by Dunn (which approval shall not be unreasonably withheld) by no later than April 30, 1996 and shall be set forth in a writing signed by All-Comm and Dunn. In the event that such allocation is not so determined and set forth in a writing signed by all-Comm and Dunn by April 30,1996, All-Comm and Dunn agree that the amount of Coopers & Lybrand's accounting fees properly allocable to SD&A and All-Comm shall be deemed to be $27,595 and $50,000, respectively. 7. All-Comm and Dunn agree that the amount of the Post-Closing Professional Fees through March 31, 1996 shall be mutually agreed upon in writing by All-Comm and Dunn by no later than April 30, 1996. In the event that the amount of the Post-Closing Professional Fees is not so mutually agreed upon by April 30, 1996, All-Comm and Dunn agree the amount of the Post-Closing Professional Fees through March 31, 1996 shall be deemed to be $60,000. 27 8 8. In the event that Dunn exercises his right to repurchase the Shares from All-Comm on or after July 1, 1996, All-Comm agrees that it shall be required to file, and will file, consolidated federal and combined state income tax returns for itself, SD&A and all of its other active subsidiaries in respect of the fiscal year ended June 30, 1996 and any subsequent stub periods and that All-Comm (and not SD&A) shall be solely responsible for Paying , and will pay, any and all federal and state income tax liabilities of such group (including any interest and penalties) in respect of such fiscal year and any stub period thereafter irrespective of any prior tax treaty executed or otherwise agreed to by All-Comm, Dunn and/or SD&A. Notwithstanding the foregoing, Dunn agrees to cause SD&A to cooperate with All-Comm in connection with All-Comm's preparation and filing of such federal and state income tax returns in respect of such fiscal year and any subsequent stub period. 9. All-Comm represents that this Third Memorandum of Understandings as well as all prior amendments to the Purchase Agreement and the Operating Covenants Agreement have been duly authorized by all necessary corporate action on its part. 10. Except as set forth herein, all of the terms and provisions of the Purchase Agreement and the Operating Covenants Agreement, as heretofore amended, between All-Comm and Dunn (including, but not limited to, the provisions of Section 7 of the Second Memorandum) shall remain in full force and effect. All-Comm and Dunn agree that, in the event that any of the provisions hereof are deemed to be inconsistent with the provisions of the Purchase Agreement and the Operating Covenants Agreement, each as heretofore amended, the provisions of this Third Memorandum of Understanding shall prevail over any such inconsistent provisions of the Purchase Agreement and the Operating Covenants Agreement, each as heretofore amended. ALL-COMM MEDIA CORPORATION (formerly Alliance Media Corporation) By: /s/ E. William Savage /s/ Stephen Dunn ---------------------------- ----------------- E. William Savage, President Stephen Dunn and Chief Operating Officer 28 9 ALL-COMM MEDIA CORPORATION THIRD MEMORANDUM OF UNDERSTANDING SCHEDULE "A"
PRINCIPAL PERIOD DUE # OF INTEREST ACCRUED AMOUNT DATE DAYS RATE INTEREST - - -------------------------------------------------------------------------------------------- 4,125,000 09/01/95 - 09/30/95 10/01/95 30 8.75% $29,666.10 * 3,750,000 10/01/95 - 10/31/95 11/01/95 31 8.75% 27,868.15 3,750,000 11/01/95 - 11/30/95 12/01/95 30 8.75% 26,969.18 3,750,000 12/01/95 - 12/19/95 01/01/96 19 8.75% 17,080.48 3,750,000 12/20/95 - 12/31/95 01/01/96 12 8.50% 10,479.45 3,750,000 01/01/96 - 01/31/96 02/01/96 31 8.50% 27,071.92 3,750,000 02/01/96 - 02/29/96 03/01/96 28 ** 8.25% 23,732.88 3,750,000 03/01/96 - 03/31/96 04/01/96 31 8.25% 26,275.68 3,750,000 04/01/96 - 04/30/96 05/01/96 30 8.25% 25,428.08 3,750,000 05/01/96 - 05/31/96 06/01/96 31 8.25% 26,275.68 ----------- SUBTOTAL 240,847.60 INTEREST DUE ON PAST-DUE INTEREST - EXHIBIT 2(A)(II) 4,111.61 LOAN PROCESSING FEE 3,257.36 PREPAID INTEREST PARTIAL FOR JUNE 1996 1,783.43 ----------- TOTAL $250,000.00 ===========
* REDUCTION IN PRINCIPAL COVERED IN MEMORANDUM OF UNDERSTANDING DATED OCTOBER 1, 1995, AND 3 PAYMENTS OF $33,792.67 EACH ARE CURRENTLY LATE AND IN ARREARS. ** NOTE USED 28 DAYS AND 365 DAY YEAR FOR CONSISTENCY. 29 EX-11 4 STATEMENTS REGARDING COMPUTATION OF NET INCOME 1 Exhibit 11 STATEMENTS REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
Three Months Ended Nine Months Ended March 31 March 31 1996 1995 1996 1995 ------------------------ ------------------------ Net income (loss) per share was calculated as follows: Primary: Income (loss) from continuing operations before discontinued operations $ (421,876) $ (161,581) $(1,328,410) $ 610,341 Income (loss) from discontinued operations 492,496 306,371 ---------- ---------- ----------- ---------- Net income (loss) $ (421,876) $ 330,915 $(1,328,410) $ 916,712 ========== ========== =========== ========== Weighted average common shares outstanding 3,047,543 1,463,784 3,027,624 1,459,304 Incremental shares under stock options computed under the treasury stock method using the average market price of the issuer's common stock during the periods 194,714 14,423 99,128 6,545 Weighted average common and common equivalent shares outstanding unless antidilutive 3,047,543 1,478,207 3,027,624 1,465,849 Income (loss) per share from continuing operations $ (.14) $ (.11) (.44) .42 Income (loss) per share from discontinued operations .33 .21 Net income (loss) per share (.14) .22 (.44) .63 Fully diluted: Income (loss) from continuing operations before discontinued operations $ (421,876) $ (161,581) $(1,328,410) $ 610,341 Income (loss) from discontinued operations 492,496 306,371 ---------- ---------- ----------- ---------- Net income (loss) $ (421,876) $ 330,915 $(1,328,410) $ 916,712 ========== ========== =========== ========== Weighted average common shares outstanding 3,047,543 1,463,784 3,027,624 1,459,304 Incremental shares under stock options computed under the treasury stock method using the market price of the issuer's common stock at the end of the periods if higher than the average market price 194,714 20,460 99,128 20,460 Weighted average common and common equivalent shares outstanding unless antidilutive 3,047,543 1,484,244 3,027,624 1,479,764 Income (loss) per share from continuing operations $ (.14) $ (.11) $ (.44) $ .41 Income (loss) per share from discontinued operations .33 .21 Net income (loss) per share (.14) .22 (.44) .62
30 EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ALL-COMM MEDIA CORPORATION AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 INCLUDED IN THIS REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH FINANCIAL STATEMENTS. U.S. DOLLARS YEAR JUN-30-1996 JAN-01-1996 MAR-31-1996 1 726,068 0 1,737,503 (40,552) 0 2,519,926 461,641 (172,427) 10,876,985 4,618,697 1,875,000 0 0 31,094 3,951,278 10,876,985 3,723,945 3,723,945 2,620,576 2,620,576 0 0 97,911 (409,248) (12,628) (421,876) 0 0 0 (421,876) (.14) (.14)
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